# In re ACE Am. Ins. Co.

Supreme Court of Texas, No. 25-0461

**In re ACE Am. Ins. Co., No. 25-0461 (Tex. May 8, 2026). Holding: A trial court clearly abuses its discretion in denying appraisal under a commercial-property policy where the parties' dispute is at least in part about the amount of loss; potential coverage disputes do not defeat a contractual right to appraisal, and an insurer's alleged bad faith or prior breach is not an exception to enforcing an appraisal clause.**

Practice areas: insurance

## Key issues

- A trial court abused its discretion by refusing to compel appraisal under commercial-property policies where the parties' dispute was at least partly about the amount of loss; appraisal should not be barred at the outset unless the amount of loss will never be needed.
- The Court conditionally granted mandamus and directed the trial court to compel appraisal.

## Factual History
The Insured owns, leases, and manages commercial properties nationwide, and the Insurers collectively insured them through commercial-property policies for March 1, 2022, to March 1, 2023 (Opinion, PDF p. 2). On June 12, 2022, a water line supplying the fire-suppression system of a Dallas food-distribution warehouse ruptured below the concrete slab, causing considerable damage, and the Insured timely notified the Insurers, who retained an independent adjuster (Opinion, PDF pp. 2-3). The policy's appraisal provision lets either party demand an appraisal of the loss if they "disagree on the amount of loss," and in January 2023 the Insurers invoked it, citing an impasse on the scope of damage and costs after certain undisputed payments, but the Insured declined to participate, calling appraisal premature (Opinion, PDF pp. 3-4). The Insurers say they paid $9 million and the Insured wants $30 million more (Petition for Writ of Mandamus filed (Relator), PDF p. 20).

## Procedural History
After a standstill agreement and further negotiations failed, the Insurers reaffirmed their demand in June 2024, the Insured refused again, and the Insurers sued and moved to compel appraisal, saying they had paid all that is owed while the Insured believes more is due; the Insured counterclaimed for breach of contract, Insurance Code violations, bad faith, and a declaratory judgment (Opinion, PDF p. 4). The trial court denied the motion to compel appraisal and the Fifth Court of Appeals (Dallas) denied mandamus relief (Opinion, PDF p. 4). The vehicle in this Court is an original proceeding for writ of mandamus, argued February 10, 2026, and decided May 8, 2026 (Opinion, PDF pp. 1, 13).

## Issues Presented
The Insurers present two issues (Petition for Writ of Mandamus filed (Relator), PDF p. 12):
1. Whether the trial court abused its discretion in denying their motion to compel appraisal when the parties agree the policy requires submitting disputes over the amount of loss to appraisal, disagree on the amount of loss, and have reached an impasse, and the Insured seeks to avoid appraisal by alleging bad faith and anticipatory breach.
2. Whether there is an adequate appellate remedy when the trial court prohibits an appraisal vital to defending a breach-of-contract claim.

## Standard(s) of Review
Mandamus is appropriate to enforce an appraisal clause, because erroneously denying appraisal would vitiate the insurer's right to defend the insured's breach-of-contract claim, and the Court asks whether the trial court clearly abused its discretion and the insurers lack an adequate remedy by appeal (Opinion, PDF pp. 5, 13).

## Legal Arguments
**Whether the dispute is about the amount of loss or about coverage.**

**Insurers (Relators):** The only question in the underlying dispute is how much it costs to remedy the damage, and once the parties reached an impasse the Insurers properly invoked appraisal, so the Insured's coverage and "bad faith" arguments are artful pleading to avoid a clear contractual requirement and Texas's strong public policy favoring appraisal (Petition for Writ of Mandamus filed (Relator), PDF p. 20; Brief on the Merits (Relator), PDF p. 23). The issues the Insured calls coverage disputes, such as how to repair damage, whether to repair or replace, and the extent of damage, are amount-of-loss issues (Brief on the Merits (Relator), PDF p. 23).

**Insured (Real Party in Interest):** The dispute is far more than a pure quantum dispute, and even if it were, appraisal would be improper because the Insurers have yet to take a concrete position on coverage and damages or communicate the bases for their positions clearly, timely, and in detail, instead taking a "moving target" of positions (Response to Petition for Writ of Mandamus Filed (Real Parties in Interest), PDF p. 16; Brief on the Merits (Real Parties in Interest), PDF p. 12).

**Whether the Insurers' alleged prior breach or bad faith bars appraisal.**

**Insured (Real Party in Interest):** The Insurers failed to adjust the claim timely and in good faith and failed to pay amounts owed, so they materially breached first and cannot enforce the appraisal clause (Opinion, PDF pp. 11-12). **Insurers (Relators):** Asserting bad faith and anticipatory breach does not avoid appraisal (Petition for Writ of Mandamus filed (Relator), PDF p. 12).

## Stated Reasons the Court Should Take the Case
The Insurers argued that the trial court's denial of appraisal left them without an adequate appellate remedy because appraisal is vital to defending the Insured's breach-of-contract claim (Petition for Writ of Mandamus filed (Relator), PDF p. 12; Opinion, PDF p. 5).

## Oral Argument

- **Appraisal first.** Asked whether the Court should order appraisal or decide coverage first, relator's counsel said it should do what it did 17 years ago in a State Farm case. (Oral Argument, 0:45:50)
- **Beyond quantum.** The real party's counsel said the dispute over mold remediation goes beyond amount of loss, so appraising first would be inefficient with other coverage issues unresolved. (Oral Argument, 0:21:24; 0:22:29)
- **Denial is no bar.** Asked whether appraisal is still required if it would serve no purpose, relator's counsel said a coverage denial is no impediment to appraisal under *Johnson*. (Oral Argument, 0:10:51; 0:11:43)
- **Trial court's discretion.** The real party's counsel said appraisal would not never apply; a trial court may decide first if there is a breach or issues beyond mere quantum. (Oral Argument, 0:26:13; 0:27:02)
- **Fixing appraisers' errors.** Asked whether a court can fix legal errors in an award, relator's counsel said the law lets either side challenge an award for material mistake or fraud. (Oral Argument, 0:41:53; 0:44:40)
- **Timing of demand.** Asked about limits on the timing of an appraisal demand, relator's counsel said it must come within a reasonable time after impasse. (Oral Argument, 0:02:02)
- **Cost of appraisal.** Asked what appraisal would cost, the real party's counsel said appraisers are usually not that expensive, often construction professionals, or accountants. (Oral Argument, 0:37:15)
- **Lost rent.** The real party's counsel said the insurer paid two months of lost rent though its own expert says rebuilding takes six and a half months. (Oral Argument, 0:36:12)

## Practice Area Tags
insurance

## Procedural Posture/Vehicle
Original proceeding for writ of mandamus after the Fifth Court of Appeals (Dallas) denied relief; argued February 10, 2026, and decided May 8, 2026 (Opinion, PDF pp. 1, 4, 13).

## Amicus Involvement
- [American Property Casualty Insurance Association](https://search.txcourts.gov/SearchMedia.aspx?MediaVersionID=ba26ad26-944d-4041-9d31-2c71c0f404b9&coa=cossup&DT=BRIEFS&MediaID=7303faf3-af89-4d70-920e-a3160c8f4393) filed an amicus brief.

## Holding
A trial court clearly abuses its discretion in denying appraisal under a commercial-property policy where the parties' dispute is at least in part about the amount of loss; potential coverage disputes do not defeat a contractual right to appraisal, and an insurer's alleged bad faith or prior breach is not an exception to enforcing an appraisal clause (Opinion, PDF pp. 1-2, 7, 10-13).

## Court's Reasoning
**Appraisal law.** Appraisal clauses provide a means to resolve disputes about the amount of loss for a covered claim, and under *Johnson* appraisal is limited to damages and does not decide the insurer's liability, but the fact that appraisal may turn out to involve liability questions does not bar it at the outset: "unless the 'amount of loss' will never be needed . . . appraisals should generally go forward without preemptive intervention by the courts" (Opinion, PDF pp. 5-7). A party seeking to avoid appraisal on the ground that the dispute falls outside the provision must clear a significant hurdle (Opinion, PDF p. 7).

**The dispute is at least partly about amount of loss.** The Insurers do not argue, and the record does not show, that anything other than the water-main rupture caused the damage, and the Insured's asserted coverage disputes over mold remediation, building-code compliance, and the replacement cost of damaged property are disagreements about cost, not coverage, which an appraisal would not foreclose a court from resolving afterwards (Opinion, PDF pp. 7-10). The Court did not hold that no coverage disputes remain, only that they do not make appraisal improper in the first instance, because it cannot say the amount of loss will never be needed (Opinion, PDF p. 10).

**Genuine disagreement.** The Insurers took the position in the trial court and in this Court that they had paid all that is owed, and to "disagree" is simply to fail to agree, so no definitive or consistent valuation is required for a genuine disagreement (Opinion, PDF p. 11).

**Prior breach and bad faith.** The Court has recognized only two limited exceptions to enforcing an appraisal provision, illegality and waiver, and the prior-breach argument puts the cart before the horse because it would require deciding in the first instance whether the Insurers breached the policy; if alleging a dispute over coverage or claims handling avoided appraisal, appraisal clauses "would be virtually a nullity" (Opinion, PDF pp. 11-13).

## Disposition
Mandamus conditionally granted, directing the trial court to grant the Insurers' motion to compel appraisal, with the writ to issue only if the trial court does not comply (Opinion, PDF p. 13).

## Vote Breakdown
Justice Lehrmann delivered the opinion of the Court, with no separate writings (Opinion, PDF p. 1).


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Source: The SCOTX Report, https://scotxreport.com/cases/25-0461. AI-generated summary of the Court's opinion, orders and the parties' briefs, with pin cites to the page of each document; verify against the Court's own documents at search.txcourts.gov.